California Cities Considering (Legal?) Theft of Private Property

All Americans should be very, very alarmed. Today’s Wall Street Journal ran a front page story on a proposal put forth by Mortgage Resolution Partners LLC as a ‘solution’ to the problem of underwater mortgages. When you read their PowerPoint presentation for comprehension it is clearly threatening to all commonly perceived rights of private property and free will.

Here is their summary slide describing the program…

The essence of the plan is to force private owners of mortgages to sell them to Mortgage Resolution Partners LLC [MRT] under the guise of eminent domain. MRT would initially only ‘take’ mortgages that are underwater based on estimated market value but that are current on their payments [NOT in default].

This is MRP’s own description of which loans they intend to seize…

Non-defaulted but underwater mortgages are highly profitable to those holding the paper. Payments are being made as scheduled at interest rates generally well above today’s rates on similar mortgages. This would be similar to your holding an older non-callable 10-year CD or bond at a 7% annual interest rate. You would never want to give that up early except at a premium to face value.

The borrowers, by definition, have the ability to pay the monthly amounts due. That’s why they are not in default. The current market value of their homes has no bearing on their ability to pay the mortgage. That is a function of some combination of the borrower’s income and assets.

MRP would not only be confiscating highly desirable assets from private citizens or businesses but they’d also be setting artificially low prices as compensation.

The following are excerpted directly from MRP’s own PowerPoint.

Note the phrase “Neither under any compulsion to transact.” Eminent domain is the exact opposite. Holders of not in default mortgages would be forced to sell, period.

Not everyone is a mortgage lender. Many more investors own stocks. Imagine that someone could come along after a big stock market crash (such as Oct. 1987, Aug. 1998, post-Sep. 11, 2001, Aug. 2010, Oct. 2011 etc.) and determine you must sell them all your underwater shares, and at a discount to their already depressed market prices. In essence that would be an involuntary margin sell-out even if you were not on margin!

MRP will make money by seizing privately held mortgages through government action at “fair value” which MRP then defines as “significantly less than the fair value of the home.”

This is nothing short of the improper taking of private property against the will of the holder of said property.

Favored (politically connected?) borrowers who are financially able to keep paying their mortgages as promised contractually will get principal reductions (free money) at the expense of those who entered into valid contracts with them. Can you say “involuntary transfer of wealth?”

MRP likes to say:

Consider this…

The windfall profits of the ‘lucky’ homeowners who receive principal reduction will likely not be taxed. While MRP implies that the forgone tax receipts would not be used for purchase of boats, cars or other non-necessities there would be no possible way to enforce this. Money is fungible.

When taxes are forgiven for one group of taxpayers all other taxpayers must pay more to make up the difference.

MRP is offering ipso facto ‘bribes’ to government entities and charities to induce their participation in this scheme. OPM [confiscated from the original lenders] is always welcomed by these groups.

How bad will the ‘Fair Pricing” of the non-defaulted loans be for those forced to sell them? Bad enough to provide funding for MRP’s employees, MRP’s fees, all legal expenses, all debt forgiveness, all forgone future interest payments and money enough to ‘share’ with local government agencies and/or charities.

Once the fiscal rape of the original mortgage holders is completed… newly created, now very attractive MBS would be shopped to private investors who would profit from the value taken away from the rightful owners of these debts.

Didn’t private mortgage holders have a lot of MERS-related issues? Yes. For MRP though, these will be totally ignored and set aside.